26 USC 1273 - Determination of amount of original issue discount

U.S Code last checked for updates: May 18, 2024

§ 1273.

Determination of amount of original issue discount

(a)

General rule

For purposes of this subpart—

(1)

In general

The term “original issue discount” means the excess (if any) of—

(A)

the stated redemption price at maturity, over

(B)

the issue price.

(2)

Stated redemption price at maturity

(3)

¼ of 1 percent de minimis rule

If the original issue discount determined under paragraph (1) is less than—

(A)

¼ of 1 percent of the stated redemption price at maturity, multiplied by

(B)

the number of complete years to maturity,

then the original issue discount shall be treated as zero.

(b)

Issue price

For purposes of this subpart—

(1)

Publicly offered debt instruments not issued for property

In the case of any issue of debt instruments—

(A)

publicly offered, and

(B)

not issued for property,

the issue price is the initial offering price to the public (excluding bond houses and brokers) at which price a substantial amount of such debt instruments was sold.

(2)

Other debt instruments not issued for property

(3)

Debt instruments issued for property where there is public trading

In the case of a debt instrument which is issued for property and which—

(A)

is part of an issue a portion of which is traded on an established securities market, or

(B)

(i)

is issued for stock or securities which are traded on an established securities market, or

(ii)

to the extent provided in regulations, is issued for property (other than stock or securities) of a kind regularly traded on an established market,

the issue price of such debt instrument shall be the fair market value of such property.

(4)

Other cases

Except in any case—

(A)

to which paragraph (1), (2), or (3) of this subsection applies, or

(B)

to which section 1274 applies,

the issue price of a debt instrument which is issued for property shall be the stated redemption price at maturity.

(5)

Property

(c)

Special rules for applying subsection (b)

For purposes of subsection (b)—

(1)

Initial offering price; price paid by the first buyer

(2)

Treatment of investment units

In the case of any debt instrument and an option, security, or other property issued together as an investment unit—

(A)

the issue price for such unit shall be determined in accordance with the rules of this subsection and subsection (b) as if it were a debt instrument,

(B)

the issue price determined for such unit shall be allocated to each element of such unit on the basis of the relationship of the fair market value of such element to the fair market value of all elements in such unit, and

(C)

the issue price of any debt instrument included in such unit shall be the portion of the issue price of the unit allocated to the debt instrument under subparagraph (B).

(Added Pub. L. 98–369, div. A, title I, § 41(a), July 18, 1984, 98 Stat. 536; amended Pub. L. 99–514, title XVIII, § 1803(a)(10), Oct. 22, 1986, 100 Stat. 2794.)

cite as: 26 USC 1273